Expat rates: now is the time to move to a fixed rate

Is this the peak for fixed rates?

There are indications that a rise in base rate might happen slightly sooner than was previously thought. And with news that fixed-rate deals are at their best levels for at least eight months it could be that now is the best time to opt for a fixed-rate deal.

While the Bank of England’s Monetary Policy Committee did not move on interest rates at its last meeting and the newly released minutes show the committee was unanimous in keeping base rate at 0.5pc, the mood of the money markets has changed.

In recent months, the markets have been pointing towards the first move in base rate not happening until mid-2015. But now in their pricing of future interest rate swaps the markets seem to suggest base rate will move upwards in November 2014, thanks to fears over rising inflation.

That would suggest that choosing a fixed-rate deal of at least two years – and probably three or more – could be a good idea.

And, adding fuel to this fire is the news that savers opting for fixed rates are currently getting good deals, whatever they might think. Research from Moneyfacts, based on onshore accounts, found that the average rates paid on a one-year fixed-rate deal is 2.85pc, a level not seen since August last year.

For expats who are retired, there’s often a particular need to get a good deal on savings as they need their money to work for them to produce an income. They also need a regular, steady income so they know how much they have coming in so they can balance their budget.

In this way, a fixed-rate bond can provide the certainty. You might have other income-producing savings or investments – corporate bonds are popular for those wanting income from their savings.

But if you have a fixed rate then at least you know exactly how much you’ll be getting from it as long as it lasts. You do need a fixed-rate bond which offers the option of monthly income, but many do, so this shouldn’t be difficult.

Jim Coupe, managing director of Skipton International, says it has retired expats very much in mind at the moment. “Knowing that many of our customers are worried about retirement income, we looked hard at our savings range and came up with some new products and options to help keep them on track.

“We responded in two important ways. Firstly, we have just launched two fixed-rate products, our one- and two-year International Reserve bonds.

“Secondly, we ensured both these and our range of variable-rate deposit accounts all offered monthly interest facilities.”

Skipton’s fixed rates are not far off the best on the market at 3.50pc for two years, which is 3.3pc for the monthly interest option or 3pc for one year, which works out as 2.8pc for monthly income.

Nationwide International’s one-year fixed rate of 3.5pc for deposits of more than £50,000 is available for monthly income seekers: the rate for them is 3.45pc.

The difference between annual and monthly interest rates is down to the frequency payments are made: the annual equivalent rates work out the same.

All Clydesdale International’s fixed rates are available on monthly income, as are Alliance & Leicester International’s deals.

You may need to arrange to have the income paid to another account or the interest will be automatically reinvested in your bond.

Charlotte Beugge used tables compiled by Moneyfacts.co.uk in the writing of this article